David Tapper appears to be firmly on the artificial intelligence (AI) bandwagon. Nearly all of its top 10 holdings have AI connections.
The billionaire investor doesn’t seem as happy about some of these AI stocks as he once was. In the first quarter, Tepper sold shares Amazon Google Parents the alphabet, MicrosoftFacebook Parents Meta platformsAnd Nvidia. However, he bought all three AI stocks handover fist.
1. Alibaba Group Holding
Alibaba Group Holding (NYSE: BABA) Now ranks as the largest holding in Tepper’s Appaloosa Management portfolio. The Chinese tech giant beat out Amazon, Microsoft, Meta, and Nvidia to take the top spot after Tapper grew its shares nearly 159% in Q1.
Taper’s initiative has already paid off. Alibaba stock fell nearly 7% in the first quarter of 2024. However, it is now close to 11% year-on-year after jumping 17% in April and May.
Why did the billionaire investor decide to significantly increase Appaloosa’s position in Alibaba? Value was definitely an important factor. Alibaba shares trade at less than 10.5 times forward earnings. The stock’s price-to-earnings growth (PEG) ratio is a low 0.82.
Tepper also probably likes Alibaba’s return-to-growth strategy. The company’s Q1 results show that this strategy is paying off. Revenue rose 7% year-over-year in Q1. Alibaba recently shook up the Chinese AI services market by slashing the prices of its AI offerings.
2. Oracle
Appaloosa Management added to its position. Oracle (NYSE: ORCL) About 74 percent in Q1. The big purchase moved Oracle to eighth place in the hedge fund’s portfolio.
Oracle enjoyed solid momentum throughout most of Q1. The stock is up nearly 20 percent so far this year after rebounding from April’s pullback. Even with that nice leverage, though, Oracle’s forward earnings multiple is less than 20 — less expensive than most megacap AI stocks.
I suspect that Tepper finds Oracle’s cloud business particularly appealing. The company’s cloud revenue grew 25% year-over-year to $5.1 billion in its most recent quarter, representing 38% of total revenue.
AI continues to be a major growth driver for Oracle’s cloud unit. CEO Safra Katz said in a fiscal Q3 earnings press release that demand for the company’s Gen2 AI infrastructure “significantly outstrips supply — despite the fact that we are opening up new and expanded cloud.” [data-centers] Very, very fast.”
3. PDD Holdings
PDD Holdings (NASDAQ: PDD ) Appaloosa ranks as the ninth-largest holding in Management’s portfolio, behind Oracle. Tepper bought more than 1.3 million shares of the Chinese tech stock in Q1, increasing his hedge fund’s holdings by about 171%.
Many US investors may be unfamiliar with PDD. The company operates Pinduoduo, a popular e-commerce platform in China. It also operates Temu, a relatively new online marketplace targeting global markets, including the US.Like its American counterpart, Amazon, PDD has invested heavily in AI technology.
PDD had a tough Q1 with shares plunging nearly 25% at one point. However, the stock has rebounded strongly in recent weeks. This rebound was partly due to PDD’s positive Q1 results. Revenue grew 131% year over year with adjusted earnings more than tripling year over year.
Tepper no doubt likes the diagnosis of PDD. Shares trade at 16.4 times forward earnings with a PEG ratio of 0.71. Billionaires can also see PDD’s team strategy as an excellent driver of long-term growth.
Better than Amazon, Alphabet, Microsoft, Meta, and Nvidia?
Are Alibaba, Oracle, and PDD better choices than Amazon, Alphabet, Microsoft, Meta, and Nvidia? The taper seems to be — or at least what it was in Q1. One thing’s for sure: All three of these stocks are cheaper than the Five Magnificent Seven stocks. This may appeal to other investors with the overall stock market being priced at a premium.
I am somewhat hesitant to invest in Alibaba and PDD due to uncertainty about possible actions by the Chinese government. However, I think all eight stocks should be big winners in the long term.
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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Randy Zuckerberg, former director of market development and spokeswoman for Facebook and sister of MetaPlatforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Keith Speights has held positions at Alphabet, Amazon, MetaPlatforms and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, MetaPlatforms, Microsoft, Nvidia and Oracle. The Motley Fool recommends Alibaba Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a Disclosure Policy.
Billionaire David Tapper sold Amazon, Alphabet, Microsoft, Meta, and Nvidia in Q1. But Here Are 3 AI Stocks He Bought Handover Fist Originally Posted by The Motley Fool